The report, authored by the University of NSW, found that one quarter of the 2,700 prisoners in NSW who had a known mental illness or cognitive disability were Indigenous, despite making up less than 3% of the state’s overall population.

Calma, the adjunct professor of the ANU’s centre for Indigenous studies, said the incarceration rate for Aboriginal and Torres Strait islanders with mental illness was deeply concerning.

State and commonwealth governments must take a “community empowerment” approach via justice reinvestment programs, he said. The initiative redirects money that is being used to lock up prisoners to community programs that treat the underlying cause of offending.

Calma told Guardian Australia that the initiatives have a proven track record.

“Governments have to be brave,” he said. “The economics are there. It’s been proven in the United States, where 20 or so states have signed up to the justice reinvestment program.”

The programs have also been successful in the NSW towns of Bourke and Cowra.

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“The police are sensing that there is a curbing in crime rates,” Calma said. “We need to focus on the communities to stop the offending in the first place.”

He said that too often mental illness and cognitive disability in Indigenous people goes undiagnosed and untreated, which can lead to incarceration rather than appropriate treatment and intervention.

“We need to look at what is the catalyst for the mental health issues,” he said.

The University of NSW report highlights some of the underlying causes or exacerbators of mental illness for Indigenous Australians.

Those include the prevalence of foetal alcohol spectrum disorder (Fas-D), drug and alcohol abuse, exposure to trauma and high rates of poverty and homelessness, which may prohibit seeking treatment.

The report also noted that Aboriginal and Torres Strait islanders have contact with law enforcement authorities at a younger age, making them more susceptible to serving jail time.